Case 3:17-cv-05659-WHA Document 216 Filed 10/29/18 Page 1 of 7
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`FINJAN, INC.,
`Plaintiff,
`
` v.
` JUNIPER NETWORK, INC.,
`Defendant.
` /
`
`No. C 17-05659 WHA
`
`ORDER RE MOTION FOR
`LEAVE TO AMEND AND
`VACATING HEARING
`
`INTRODUCTION
`In this patent infringement action, a prior order permitted accused infringer to seek
`leave to amend. Accused infringer now timely moves for leave to amend to include additional
`factual allegations to existing claims and defenses. For the reasons stated below, the motion is
`GRANTED IN PART and DENIED IN PART.
`STATEMENT
`Plaintiff Finjan, Inc., accuses defendant Juniper Networks, Inc., of infringing patents
`pertaining to malware-detection technology. Finjan’s allegations have been summarized in a
`prior order (see, e.g., Dkt. No. 30). On June 15, Finjan moved to dismiss various
`counterclaims and strike related affirmative defenses, which were based on prosecution laches,
`inequitable conduct, unclean hands, and ensnarement (Dkt. No. 110).
`An order dated August 31 granted in part and denied in part Finjan’s motion to strike
`and dismiss Juniper’s answer and counterclaims (Dkt. No. 190). Specifically, the order
`granted Finjan’s motion to dismiss Juniper’s prosecution laches and inequitable conduct
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`Case 3:17-cv-05659-WHA Document 216 Filed 10/29/18 Page 2 of 7
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`counterclaims (and strike the related affirmative defenses) and strike Juniper’s ensnarement
`affirmative defense (id. at 3–9). That order also gave Juniper opportunity to seek leave to
`amend within twenty-one days of the order.
`Juniper now timely moves for leave to amend and submits a proposed amended
`responsive pleading. Its proposed amendment seeks only to add factual allegations in support
`of Juniper’s already-existing counterclaims and affirmative defenses. Finjan opposes in part.
`This order follows full briefing. Pursuant to Civ. L.R. 7-1(b), this order finds Juniper’s motion
`suitable for submission without oral argument and hereby VACATES the hearing scheduled for
`November 1.
`
`ANALYSIS
`Federal Rule of Civil Procedure 15(a)(2) provides that a court should “freely give leave
`when justice so requires.” In ruling on a motion for leave to amend, courts consider: (1) bad
`faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment, and (5)
`whether the plaintiff has previously amended their complaint. Futility alone can justify
`denying leave to amend. Nunes v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2004). For purposes
`of assessing futility on this motion, the legal standard is the same as it would be on a motion to
`dismiss under Rule 12(b)(6). Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988).
`In the order dated August 31, the Court stated that the motion “must include a proposed
`amended responsive pleading (and a redlined copy) and must explain why the new pleading
`overcomes all deficiencies,” including those the order did not reach (Dkt. No. 190 at 12).
`Finjan argues essentially that the proposed amendment is futile as to the inequitable conduct
`and prosecution laches allegations (i.e., Juniper fails to cure the deficiencies) and that it would
`be prejudiced by such amendment.
`1.
`INEQUITABLE CONDUCT.
`In its proposed amended pleading, Juniper includes additional factual allegations to
`support its fourth and fifth counterclaims and fourteenth affirmative defense of inequitable
`conduct regarding United States Patent Nos. 8,677,494 (“the ’494 patent”) and 8,141,154 (“the
`’154 patent”).
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`Case 3:17-cv-05659-WHA Document 216 Filed 10/29/18 Page 3 of 7
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`To state a claim for inequitable conduct, a party must allege that “(1) an individual
`associated with the filing and prosecution of a patent application made an affirmative
`misrepresentation of a material fact, failed to disclose material information, or submitted false
`material information; and (2) the individual did so with a specific intent to deceive the PTO.”
`Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 n.3 (Fed. Cir. 2009).
`“Inequitable conduct . . . must be pled with particularity under Rule 9(b).” Id. at 1326
`(quotations and alterations omitted). This requires identification of “the specific who, what,
`when, where, and how of the material misrepresentation or omission committed before the
`PTO.” Id. at 1328. “Although knowledge and intent may be alleged more generally, a party
`must still allege sufficient facts to justify an inference that a specific individual had knowledge
`of the material information withheld or the falsity of the material misrepresentation and
`withheld or misrepresented that information with the intent to deceive.” Oracle Corp. v.
`DrugLogic, Inc., 807 F. Supp. 2d 885, 896–97 (N.D. Cal. 2011) (citing Exergen, 575 F.3d at
`1328–29) (Judge Joseph Spero).
`A.
`Touboul Declaration.
`As discussed in the August 31 order, Juniper’s fourth counterclaim directed to the ’494
`patent alleges that Shlomo Touboul knowingly made false material misrepresentations before
`the PTO that he was the sole inventor of certain claims — including Claim 10 — thus
`backdating the priority date to November 18, 1996, for the purpose of avoiding the potentially
`invalidating Ji reference. That order found that Juniper’s factual allegation raised in its
`original pleading regarding Finjan’s interrogatory response in the Symantec case insufficient.
`Juniper now seeks to amend the fourth counterclaim to include additional factual
`support showing, inter alia, the falsehood of Touboul’s statement. Specifically, Juniper now
`alleges that David R. Kroll — one of the ’494 patent’s co-inventors — testified under oath in
`Finjan, Inc. v. Blue Coat Systems, Inc., No. C 15-03295 BLF (N.D. Cal. Nov. 28, 2017) (Judge
`Beth Labson Freeman), that he contributed to Claim 10 (Dkt. No. 197-2 at 460:24–461:1):
`Q. Yes. You helped come up with the idea behind claim 10 during
`your time at Finjan; is that right?
`A. Yes.
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`Case 3:17-cv-05659-WHA Document 216 Filed 10/29/18 Page 4 of 7
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`Kroll further testified that he began working at Finjan in 1999 — at least three years after
`Touboul’s asserted priority date (see id. at 451:11–12). Finjan counters that “this single
`statement” by Kroll in response to a “vague” question does not establish the falsehood of
`Touboul’s statement (Dkt. No. 202 at 3). Finjan’s contention, however, is more appropriate at
`a summary judgment stage. This order finds that at the pleading stage, the additional factual
`allegations are sufficient to support a showing of the falsehood of Touboul’s statement under
`the heightened pleading standard.1
`Finjan further argues that Touboul’s intent to deceive the PTO based on statements
`made by others is speculative (id. at 5). Knowledge and intent, however, may be alleged more
`generally under Rule 9(b), and “[p]leading on ‘information and belief,’ ” — as Juniper does
`here — “is permitted under Rule 9(b) when essential information lies uniquely within another
`party’s control.” Exergen Corp., 575 F.3d at 1330. At the pleading stage, these additional
`factual allegations, when taken together as true, sufficiently support a reasonable inference that
`Touboul made material affirmative misrepresentations with the intent to deceive the PTO in
`order to backdate potentially invalidating prior art.2
`B.
`Attorney Bey’s Petitions.
`Juniper further alleges that Finjan’s patent prosecution attorney Dawn-Marie Bey filed
`“unmistakably false” certified petitions before the PTO that her claims of priority were
`“unintentionally” delayed with respect the ’494 and ’154 patents. It additionally alleges that
`Attorney Bey filed such petitions with unusually high frequency for Finjan and incorporates by
`reference Juniper’s unclean hands counterclaim alleging Finjan’s overarching scheme of
`
`1 Because this order finds Juniper’s factual allegations regarding Kroll sufficient, it does not reach Finjan’s
`argument regarding Juniper’s additional allegations in connection with United States Patent No. 7,058,822. This additional
`allegation should be included in the final pleading.
`
`2 Finjan argues that Juniper “must prove that deceptive intent is the ‘single most reasonable inference able to be
`drawn form the evidence’ ” (Dkt. No. 202 at 4 (citing Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290 (Fed.
`Cir. 2011))). Such proof, however, is necessary to prevail on the merits, as “the accused infringer must prove both materiality
`and intent by clear and convincing evidence.” Exergen Corp., 575 F.3d 1312, 1329 n.5 (Fed. Cir. 2009). At the pleading
`stage, however, inference of deceptive intent need only be “reasonable and drawn from a pleading’s allegations of underlying
`fact to satisfy Rule 9(b).” Ibid.
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`Case 3:17-cv-05659-WHA Document 216 Filed 10/29/18 Page 5 of 7
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`maximizing the value of its patents. Finjan argues that Juniper alleges no facts showing that
`Attorney Bey’s filings are anything but ordinary actions by a patent prosecutor in charge of a
`busy docket (Dkt. No. 202 at 2). This order disagrees.
`For example, with regard to the ’154 patent, Juniper’s proposed amendment further
`establishes a pattern of “unintentional” delayed claims of priority. This in turn further supports
`the reasonable inference of Attorney Bey’s intentional delay “in order to maximize the value of
`the ’154 patent during pre-suit licensing negotiations and only attempt[] to correct the claim of
`priority once it became clear that the ’154 Patent would be subject to serious invalidity attacks
`in litigation,” as Attorney Bey’s petition “conspicuously coincided with a new campaign by
`Finjan to assert the ’154 Patent” (Dkt. No. 197-5 ¶¶ 249, 251). See Exergen Corp. v. Wal-Mart
`Stores, Inc., 575 F.3d 1312, 1330 (Fed. Cir. 2009). And, Attorney Bey’s alleged
`“unmistakably false” affidavits in the form of certified petitions of “unintentionally” delayed
`priority are per se material. Outside the Box Innovations, LLC v. Travel Caddy, Inc., 695 F.3d
`1285, 1294 (Fed. Cir. 2012). These allegations, when taken together as true, sufficiently
`support a showing that Attorney Bey’s petition of “unintentional” delay in connection with the
`’154 patent was false.
`Finjan further argues that Juniper’s allegations fail to adequately plead facts from
`which it may be reasonably inferred that Attorney Bey delayed with the specific intent to
`deceive the PTO (Dkt. No. 202 at 5). Again, “[p]leading on ‘information and belief is
`permitted under Rule 9(b) when essential information lies uniquely within another party’s
`control.” Exergen Corp., 575 F.3d at 1330. Moreover, Attorney Bey’s submission of the
`allegedly false petitions in order to avoid prior art — and the alleged pattern of such false
`petitions — “raise[] a strong inference of intent to deceive.” Intellect Wireless, Inc. v. HTC
`Corp., 732 F.3d 1339, 1345 (Fed. Cir. 2013). As such, this order finds that Juniper’s proposed
`amendment plead sufficient facts to support the reasonable inference that Attorney Bey
`delayed claim of priority with the intent to deceive the PTO.
`Accordingly, Juniper’s motion for leave to amend the fourth and fifth counterclaims
`and fourteenth affirmative defense is GRANTED.
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`Case 3:17-cv-05659-WHA Document 216 Filed 10/29/18 Page 6 of 7
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`PROSECUTION LACHES.
`2.
`“The doctrine [of prosecution laches] ‘may render a patent unenforceable when it has
`issued only after an unreasonable and unexplained delay in prosecution’ that constitutes an
`egregious misuse of the statutory patent system under the totality of the circumstances.”
`Cancer Research Tech. Ltd. v. Barr Labs., Inc., 625 F.3d 724, 728 (Fed. Cir. 2010) (quoting
`Symbol Techs., Inc. v. Lemelson Med., Educ. & Research Found., 422 F.3d 1378, 1385–86
`(Fed. Cir. 2005)). Prosecution laches also requires a finding of actual prejudice to either the
`accused infringer or the public during the period of delay. Id. at 729. This doctrine “should be
`used sparingly lest statutory provisions be unjustifiably vitiated.” Symbol Techs., Inc. v.
`Lemelson Med., Educ. & Research Found., 422 F.3d 1378, 1385 (Fed. Cir. 2005). This order
`finds that Juniper’s proposed amendment does not adequately plead prosecution laches.
`Specifically, Juniper’s proposed amendment does not plead adequate facts supporting a
`showing of prejudice. Juniper’s prosecution laches allegation begins by listing the allegedly
`unreasonably delayed prosecution of five patents at issue. For example, Juniper alleges that
`(Dkt. No. 197-5 ¶ 207):
`207.
`The ’633 Patent claims priority to an application that was filed in
`March 2000. But Finjan did not file the non-provisional application that
`matured into the ’633 Patent until June 2005, and the patent did not
`issue until January 2010, approximately ten years from the earliest
`priority application. Finjan did not provide the Patent Office with any
`reason or excuse for this long, ten-year delay in prosecuting the ’633
`Patent.
`After repeating the above allegations of unreasonable and unexplained delay for each of the
`five patents at issue, Juniper simply pleads in a conclusory fashion that (Dkt. No. 197-5 ¶ 219):
`219. During this period that Finjan was unreasonably delaying
`prosecution, Juniper invested substantial resources in developing its
`portfolio of security-related products, including the products in this
`action. Finjan’s unreasonably delayed attempts to expand and reposition
`the asserted patents has prejudiced Juniper because Juniper could not
`account for these unissued patents in its product development planning.
`This general allegation of prejudice is insufficient. Juniper does not specify which of the five
`patents and their related allegedly unreasonably delayed prosecution prejudiced Juniper insofar
`as to which of Juniper’s accused products were affected during the period of delay. See
`Cancer Research, 625 F.3d at 729. Because this order finds that Juniper’s proposed
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`amendment does not plead sufficient factual allegations of prejudice, it does not reach
`Juniper’s other arguments. Accordingly, Juniper’s motion for leave to amend the third
`counterclaim and eleventh affirmative defense is DENIED.
`3.
`ENSNAREMENT.
`Juniper’s proposed amendment includes additional factual allegations supporting its
`ensnarement doctrine affirmative defense. Finjan does not oppose (Dkt. No. 202 at 1).
`Accordingly, Juniper’s motion for leave to amend the twelfth affirmative defense is GRANTED.
`4.
`NO PREJUDICE.
`Finjan argues in one short paragraph that it will be prejudiced by Juniper’s proposed
`amendment because (1) “it will be forced to engage in discovery in order to defend” against
`Juniper’s “baseless” allegations, “particularly given that” each party is allotted “a set number
`of interrogatories,” and (2) it has not been on full and fair notice of Juniper’s counterclaims
`(Dkt. No. 202 at 7). Neither argument is persuasive. As Juniper notes, fact discovery does not
`close until end of March 2019 (Dkt. No. 35 ¶ 4). Even assuming that Finjan lacked full and
`fair notice of Juniper’s counterclaims, it now has sufficient notice with which to conduct
`discovery within the remaining five months.
`CONCLUSION
`For the foregoing reasons, Juniper’s motion for leave to amend is GRANTED IN PART
`and DENIED IN PART. Juniper’s amended pleading must comport with this order and must be
`filed and served by NOVEMBER 5 AT NOON. The answer must be filed and served within
`FOURTEEN CALENDAR DAYS thereafter.
`
`IT IS SO ORDERED.
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`Dated: October 29, 2018.
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`
`WILLIAM ALSUP
`UNITED STATES DISTRICT JUDGE
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